The Last Tranche

In this episode of the Last Tranche, Hubert Warzynski, Partner and Co-founder of Scandinavian CLO investor YMER talks about why like primary European equity again, but only for a handful of managers.

In this episode of the Last Tranche, Christine Ferris, JP Morgan's Global Head of CLO Primary talks about why she loves working with debut managers, despite the extra challenges they face. #CLO

In this episode of The Last Tranche Gretchen Lam, CEO of Octagon Credit Investors, discusses whether investing in third-party CLO equity makes sense again.

The Last Tranche with New Mountain's Kline and Moshiri: we have more flexibility than a typical CLO around industry selection In this episode of the Last Tranche, John Kline and Cyrus Moshiri from New Mountain Capital discuss the innovative rated feeder fund structure they recently priced, and why they chose this approach over a traditional middle market CLO. After explaining the details of how rated feeder funds like Guardian IV Rated Feeder work, Kline explained that one key benefit is of the structure is the increased flexibility it offers on industry diversity. Their chosen structure is a CLO-like product, but that lets them pursue their investment strategy without having to be forced into industries that we don't like as a firm.

In this episode of The Last Tranche, Matt Layton, partner and head of Europe at Pearl Diver Capital, discusses strategies for investing in CLO debt and equity amid the recent rally in liabilities. Layton says that analysing a manager's past behaviour is a better predictor of CLO equity returns than how a manager is tiered by the debt markets. He adds that some of the tier one managers have shown that they can be prone to sell loans too quickly during recent periods of volatility, which has caused those firms to lose their arbitrage faster than other managers. Layton goes on to draw parallels between today's CLO market and the vintage of deals priced in 2006 to 2007, where equity cashflows were paused during the financial crisis. When spread widening occurred on the asset side (due to amend and extend activity pushing back 2010 maturity dates) equity returns were outsized once the CLOs came back into compliance with their tests. Layton forecasts a similar market technical to play out in the next several years. Layton also discusses the investment opportunity in the US versus Europe, and how he expects the deterioration in credit quality, owing to higher interest rates, playing out amid forecasts that the US is no longer headed into a recession.

In this episode of The Last Tranche, Ujjaval Desai, head of structured products investing at Sound Point Capital Management, shares his ideas about the investment opportunity across the CLO equity universe. Desai says that the best strategies for investing in CLO equity could see returns of up to 20%, but on the other hand, firms that fail to make careful investment decisions could see negative returns. Desai speaks to the various characteristics of CLOs that impact eventual returns including manager strategies, deal vintage, the source of equity capital and more. He also speaks to some of the trends impacting the loan and CLO markets today, noting that the leveraged loan market has actually shrunk for the first time in 2023.

In this episode of The Last Tranche, Dan Ko, principal and portfolio manager at Eagle Point Credit Management, discusses the relative value opportunity in the CLO market. Ko says that his firm has not made a primary market investment in CLO equity since early 2022, in part because the tightness of the equity arbitrage means investors can get higher yields in the debt stack. Even triple A notes offer more attractive yields than some equity investments, Ko says. Ko also speaks to the cessation of Libor, given the approach of the base rate's cessation in June.

In this episode of the Last Tranche, Robert Zable, global head of Blackstone's liquid credit strategies, discusses the fallout of the regional banking crisis sparked by the collapse of Silicon Valley Bank on the CLO market. Zable says that the volatile period in March saw deposits shift from smaller regional banks to the large institutions that historically were larger investors in CLOs, a trend which could lead to tighter triple A debt pricing as these banks look to invest this capital. Zable also discusses the current opportunity within CLO management in the wake of last month's events. He speaks to the trend of consolidation within the CLO manager base, and addresses what factors can constrain a manager's ability to issue CLOs given the current volatile backdrop.

In this episode of The Last Tranche, Brian Bejile, founder and CEO of Octaura, discusses the latest developments towards electrification in the loan and CLO asset classes. Bejile draws from his own experience as a trader to highlight some of the inefficiencies that result from manually trading assets, including human error mistakes and loan settlement times. He discusses the early stages of setting up Octaura, and onboarding the major investment banks in his bid to change the way the market trades. #CLO #Creditflux #Octaura

In this episode of the Last Tranche, Joe Rotondo, senior portfolio manager on the credit investments team at MidOcean Partners, looks back on a turbulent year for the leveraged loan asset class. Rotondo discusses the key trends and moments that influenced the loan market through the last 12 months through to the present day, from the general bullishness at the start of the year, to the downturn over the summer and the slowdown in new issue supply. He identifies the key lessons the market can take from the events of the year, and looks at both the headwinds and tailwinds in place for loan investors looking into 2023. #CLO, #leveragedloan, #MidOcean

In this episode of The Last Tranche, Deborah Cohen Malka, partner and portfolio manager at AlbaCore Capital Group, discusses the performance and challenges facing the European CLO market. Cohen Malka says that assets and liabilities in European CLOs are in a delicate balance, where the pricing of a single new issue CLO raises loan prices to the extent that other new CLOs become uneconomic. She also speaks to the impact of Russia's invasion of Ukraine on credit markets, and how the energy crisis is impacting credit quality. Cohen Malka also explains the sovereign debt crisis in the United Kingdom, and says the episode provided an opportunity for investors to take advantage of pension funds forced selling of CLO triple A notes. #CLO, #Creditflux, #AlbaCore

In this episode of The Last Tranche, Bain Capital Credit managing director John Wright discusses the manager landscape in the CLO market. Wright talks about the importance of a CLO manager's role in the performance of the asset class. Whether a manager is a small or large firm, whether a manager has a captive equity fund or syndicates, or whether a manager has an aggressive or conservative investment strategy, will impact the outlook of any individual CLO. Wright also discusses the recent trend of consolidation in the CLO manager base, and argues that we're likely to see more buyouts in the near-term while longer term new managers are likely to continue to emerge. CLO, Creditflux, The Last Tranche

In this episode of the Last Tranche, Mike Nechamkin, chief investment officer and senior portfolio manager at Octagon Credit Investors, discusses the reasons behind the recovery in loan prices in recent weeks. He says that there has been a fair amount of dispersion in US loans. Although the US loan index was down 400 basis points at the end of June, smaller borrowers (loans of less than $500 million) outperformed, dropping about 300bp compared to roughly 540bp for the largest loan issuers. CLO managers seeking to print and sprint were able to pick up some of these larger loans (which had dropped only because they were the most liquid) at attractive levels. Print and sprint, says Nechamkin, is no longer a niche strategy as it was several years ago. A few managers employed this tactic in 2020 and its use has been more widespread this year. Nechamkin says the market is still pricing in risk and managers are still defensive in their investing, but both the technical and fundamental picture has improved over the last month.

In this episode of the Last Tranche, Trey Parker, co-founder and chief investment officer at Sycamore Tree Capital Partners, discusses the optimal way for a CLO manager to invest through an economic downturn #CLO, #Creditflux

#TheLastTranche, #Creditflux, #CLO, #LeveragedLoan, #CVCCreditPartners

#CLO, #leveragedloan, #newmountaincapital

Torben Skødeberg, CFA, Jim Wiant, #CLOs #ESG, #structuredcredit #leveragedloans

CLO, Leveragedloans, Bardin Hill Investment Partners

#Tetragon Financial Group, #CLO, #leveraged loans